Insurance has a history that dates back to the ancient world. Over the centuries, it has developed into a modern business of protecting people from various risks. The industry has been profitable for many years and has been an important aspect of private and public long-term finance.
In the ancient world, the first forms of insurance were recorded by the Babylonian and Chinese traders. To limit the loss of goods, merchants would divide their items among various ships that had to cross treacherous waters. One of the first documented loss limitation methods was noted in the Code of Hammurabi, which was written around 1750 BC. Under this method, a merchant receiving a loan would pay the lender an extra amount of money in exchange for a guarantee that the loan would be cancelled if the shipment were stolen. The first to insure their people were the Achaemenian monarchs, and insurance records were submitted to notary offices. Insurance was also noted for gifts of substantial value. These gifts were given to monarchs. By recording their gifts in a register, givers would receive help from a monarch by proving the gift’s existence if they were in trouble.
As the ancient world evolved, maritime loans with rates based on favorable seasons for traveling surfaced. Around 600 BC, the Greeks and Romans formed the first types of life and health insurance with their benevolent societies. These societies provided care for families of deceased citizens. Such societies continued for centuries in many different areas of the world and included funerary rituals. In the 12th century in Anatolia, a type of state insurance was introduced. If traders were robbed in the area, the state treasury would reimburse them for their losses.
Standalone insurance policies that were not tied to contracts or loans surfaced in Genoa in the 14th century. This is where the first documented insurance policy came from in 1347. In the following century, standalone maritime insurance was formed. With this type of insurance, premiums varied based on unique risks. However, the separation of insurance from contracts and loans was a major change that would influence insurance for the rest of time.
The first book printed on the subject of insurance was penned by Pedro de Santarém, and the literature was published in 1552. As the Renaissance ended in Europe, insurance evolved into a much more sophisticated form of protection with several varieties of coverage. Until the late 17th century, many areas were still dominated by friendly societies that collected money to pay for medical expenses and funerals. However, the end of the 17th century introduced a rapid expansion of London’s importance in the world of trade. This also increased the need for cargo insurance. London became a hub for companies or people who were willing to underwrite the ventures of cargo ships and merchant traders. Lloyd’s of London, one of London’s leading insurers, is still a major insurance business in the city.
Modern insurance can be traced back to the city’s Great Fire of London, which occurred in 1666. After it destroyed more than 30,000 homes, a man named Nicholas Barbon started a building insurance business. He later introduced the city’s first fire insurance company. Accident insurance was made available in the late 19th century, and it was very similar to modern disability coverage.
In U.S. history, the first insurance company was based in South Carolina and opened in 1732 to offer fire coverage. Benjamin Franklin started a company in the 1750s, which collected contributions for preventing disastrous fires from destroying buildings. As the 1800s arrived and passed, insurance companies evolved to include life insurance and several other forms of coverage. No type of insurance was mandatory in the United States until the 1930s. At that time, the government created Social Security. In the 1940s, GI insurance surfaced. It helped ease the financial difficulties of women whose husbands died while fighting in World War II. It wasn’t until the 1980s that the need for car insurance grew enough that steps were taken to make it mandatory. Although insurance is an established business, it is still changing and will change in the future to meet the evolving needs of consumers.
FAQs
In the ancient world, the first forms of insurance were recorded by the Babylonian and Chinese traders. To limit the loss of goods, merchants would divide their items among various ships that had to cross treacherous waters.
What historical event led to the creation of property insurance? ›
1666 Great Fire of London demonstrated destructive power of fire in an urban environment, leading entrepreneur Nicholas Barbon to form a business to repair houses damaged by fire. 1684 Participants in the Friendly Society in England formed a Mutual Insurance Company to cover fire losses.
What was the insurance industry originally started for? ›
The insurance industry was originally started to provide financial protection against various risks and uncertainties. It was developed to help individuals and businesses safeguard themselves from potential losses or damages.
Which is the oldest form of insurance? ›
Marine insurance is the oldest insurance
Explain the principle of Insurable Interests.
What year did life insurance start? ›
The earliest known life insurance policy was made in Royal Exchange, London on 18 June 1583. A Richard Martin insured a William Gybbons, paying thirteen merchants 30 pounds for 400 if the insured dies within one year.
What is the historical background of insurance? ›
Insurance has had a long history and its starting point can trace back to different times depending on the type of insurance. It has its origins in the Babylonian empire, Medieval guilds, the Great Fire of London, and maritime insurance.
What is the oldest insurance company in the world? ›
Hamburger Feuerkasse (English: Hamburg Fire Office) is the first officially established fire insurance company in the world, and the oldest existing insurance enterprise available to the public, having started in 1676.
Who invented the concept of insurance? ›
In the ancient world, the first forms of insurance were recorded by the Babylonian and Chinese traders. To limit the loss of goods, merchants would divide their items among various ships that had to cross treacherous waters.
Who is the father of insurance? ›
Elizur Wright: The Father of Life Insurance.
What was the first insurance in the US? ›
1735. Friendly Society, the first insurance company in the United States, was established in Charleston, South Carolina. This mutual insurance company went out of business in 1740.
Insurance in some form is as old as historical society. So-called bottomry contracts were known to merchants of Babylon as early as 4000–3000 bce. Bottomry was also practiced by the Hindus in 600 bce and was well understood in ancient Greece as early as the 4th century bce.
Why does insurance exist? ›
Purpose of insurance
Its aim is to reduce financial uncertainty and make accidental loss manageable. It does this substituting payment of a small, known fee—an insurance premium—to a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss.
What is the primary reason people buy insurance? ›
Transferring risk, or the chance of loss, is the main reason people buy insurance. When people buy insurance, they pay fees, or premiums, to protect themselves in the event of an accident or other covered loss.
When did homeowners insurance begin? ›
The first homeowner's policy per se in the United States was introduced in September 1950, but similar policies had already existed in Great Britain and certain areas of the United States.
Did Romans have life insurance? ›
Life insurance was invented by the ancient Romans when Roman soldiers created “burial clubs” as a way to pay for the religious rites and burial expenses of their fellow soldiers who died in battle.
What is the biggest life insurance policy ever? ›
The world's largest single life insurance policy has been taken out by an individual customer of HSBC Life in Hong Kong. This record-breaking whole-of-life policy boasts a US$250 million pay-out upon the anonymous policyholder's death and will paid to the individual's estate.
Why was Citizens property insurance created? ›
Overview. Citizens was created by the Florida Legislature in August 2002 as a not-for-profit, tax-exempt, government entity to provide property insurance to eligible Florida property owners unable to find insurance coverage in the private market.
What is one historic factor that led to the development of private health insurance? ›
The Great Depression led hospitals and then physicians to implement forms of insurance as means to ensure payment for services. Interestingly, conventional insurance and managed care were developed at this same time.
What was the main reason environmental insurance was created? ›
Environmental insurance is designed to respond to claims stemming from the release of pollutants into the environment. These policies are needed to fill a gap in coverage created by the pollution exclusion in the standard CGL policy.
Who invented property insurance? ›
In Colonial America, Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly Property insurance to spread the risk of loss from fire, in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.
